Many of our clients were the recipients of Economic Injury Disaster Loans (EIDL) related to the COVID pandemic.  Unlike the smaller EIDG (grants) and forgivable PPP Loans, these loans accumulate interest at 3.75% per year and must be repaid over a 30-year term.  There is an initial deferment period during which payments are not required, however, interest accrues starting on the day the loan was received.  That means there are three sorts of chapters to consider when thinking about how these loans work.  

  1. Deferment period – During this period, no payments are being made, but the interest is being added to the total which you will eventually pay back.  This was originally a 24-month period which was extended to 30 months earlier this year
  2. Interest–only repayment – In this chapter, you are making your payments, but the entire payment amount is going toward the interest which accumulated during the deferment period and nothing is going toward the original loan principal 
  3. Loan repayment – Once you have paid back all of the interest from the deferment period, your payments are applied to the monthly interest amount first and any remaining amount reduces the principal balance of the loan

There are a few other important pieces of information to know about these loans:

  • There are no pre-payment penalties.  
  • You may make full or partial payments during the deferment period, but they are not required
  • The SBA will not mail payment notices but will send reminders via email
  • You can find account balances and payment due dates in the SBA Capital Access Financial System (CAFS).  To set up your account go here: https://caweb.sba.gov/cls/dsp_login.cfm 
  • The remaining balance of the loan is due 30 years from the date of the promissory note.  That means it’s possible you will have a balloon payment at the end of the term depending on how long you deferred making payments and the amount of your monthly payments once they begin

Call to Action!

If you haven’t already done so, it may be a good idea to look at your loan and how the repayment timeline is shaping up.  If you have been able to make it through without needing all of the funds, you could consider if an early re-payment makes sense. 

Let us know if you would like us to prepare an amortization schedule for you to review. Contact your CPN Legal team or Nicole Tedford at nicolet@cpn-legal.com.